China’s FX Research Center: Gold Is The Strategy, Crude is the Tool

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Is there a risk of losing control of the dollar and the gold price? Can the US continue to be this strong over longer periods of time? There is a risk here, these things trend in cycles. It’s worth to note the dollar’s potential risk, and such risk might be exposed and may even explode. There might be a possibility of a reshuffling of the international monetary system. Gold right now is priced in dollars, but more importantly is what the price of gold will do to the meaning of the dollar.Chinese economic development and the gold market’s development have to follow China’s own theory. This is the most basic reason for us to dominate the market, to take root in the market.”

The next translation I present is from a speech by Tan Ya Ling, President of the China Foreign Exchange Investment Research Institute, given on a gold conference May 7, 2013 Beijing.

When I googled Tan Ya Ling I found a site that sells a video box (2013) from Tan Ya Ling called Currency Wars. A concept the Chinese have been familiar with for many years. In 2007 a book, that oddly hasn’t been translated in English, came out with the same title, written by Song Hongbing. A quote about this book from Wikipedia (please click and read):

Currency Wars by Song Hongbing, is a bestseller in China, reportedly selling over 200,000 copies in addition to an estimated 400,000 pirated copies in circulation and is reportedly being read by many senior level government and business leaders in China. Originally published in 2007 the book gained a resurgence in 2009 and is seen as a prominent exponent of a recently emerged genre labeled “economic nationalist” literature.

…The book looks back at history and argues that fiatcurrency itself is a conspiracy; it sees in the abolition of representative currency and the installment of fiat currency a struggle between the “banking clique” and the governments of the western nations, ending in the victory of the former. It advises the Chinese government to keep a vigilant eye on China’s currency and instate a representative currency. The book, published in 2007, also correctly described and warned of the various forms of derivative speculation used by Wall Street which eventually became the causes of massive margin call sell offs and the stock market crash in late 2008.

Tan Ya Ling: Gold Is The Strategy, Crude Oil Is The Tool

Pusblished on: May 8, 2013 17:46 from: HeXunNet

May 7, 2013, Beijing—Hosted by the Capital University of Economics and Business, the Gold Market Research Center, Jingyi Gold Co. and CPM Group, is the first gold market discussion and development trend research: The World Gold Market Investment Report. The press conference was held on the 7th of May in Beijing. Hexun.com reports exclusive on this conference. Tan Ya Ling, President of the China Foreign Exchange Investment Research Institutestates that the gold price will definitely rise:

“The [price] movement has created a unique phenomenon, that is, gold has gone through three waves. The First wave was mainly need based, the second wave was mainly investment based, and now we have entered the third wave, which is mainly venture based.

From another angle, the risk of the collapse of the Euro and the gold price. I state that I believe in the eventual collapse of the Euro. How do we look at the gold price in light of that event? The gold price right now has a connection to Europe. Europe lacks money, Europe has gold. All the European Countries hold significant high gold reserves relative to total reserves, the lowest is 40%, the highest is 70%, with Portuguese as high as 90%. They have accumulated this much gold, but having difficulty funding their budget, so what are the controller’s tricks into selling their gold? It will certainly strengthen the number one position of the US.

Further, is there a risk of losing control of the dollar and the gold price? Can the US continue to be this strong over longer periods of time? There is a risk here, these things trend in cycles. It’s worth to note the dollar’s potential risk, and such risk might be exposed and may even explode. There might be a possibility of a reshuffling of the international monetary system. Gold right now is priced in dollars, but more importantly is what the price of gold will do to the meaning of the dollar.

The focus of the discussion indicated that the prejudice of the supremacy of the dollar, and the strength and weakness of the dollar, are different from the policy of the dollar and the policy of the US. This distinction needs to be clarified. Facing the global monetary system, the US dollar cannot be replaced in the short term, it is hard to be replaced in the midterm, but in the long term it prepares to replace itself. It thinks far in the future, it thinks very deeply, very thoroughly. The key is whether we have thought about this, whether we have thought clearly about it, whether we have thought it through. Thegold market has different facets like the physical gold market, paper contracts, RMB denominated and dollar denominated products. Why do we only store the physical gold? If we over store our physical gold, others will come prepared for it specifically. Our physical gold has been overly developed. Even if the gold price is really good, and the gold has more growing trends, it still needs to have a good proportion, it cannot cross the line. This is our nucleus of warning signs for risk and of assets allocation. We cannot deploy assets by following the price; we have to deploy assets by our own ability, following the change of the market.

Therefore the topic of gold is not that simple. Gold is closely related to the whole financial market and the macro economy. Therefore I especially agree with what Zhang Bing Nan said this morning. He stressed the word “theory”. We need to find our own theory; yet we are in a time that lacks theory. China did not rely on numbers, but on concepts to catch the world’s attention. Chinese economic development and the gold market’s development have to follow China’s own theory. This is the most basic reason for us to dominate the market, to take root in the market.”

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12 thoughts on “China’s FX Research Center: Gold Is The Strategy, Crude is the Tool”

If the USD can get away with a couple trillion addition on annual basis and still risk dangerous deflation. What will the EUR need to do to get an actual collapse going?
There is a difference between being sloppy balancing your budget and overspending by double.

I didn’t read any reference to crude oil in the article. Maybe I smoked too much this morning. This seems to convey a sense of nationalism on the part of the Chinese. Despite living under an autocratic regime they still have some team integrity. It would be prudent to keep an eye on these guys. I’m more worried about their lobbyists in Washington and the pricks that are selling US all out to the Chinese and other foreign interests. I am sticking with white metal copper lead and brass.

What I’ve gone a long way to show under my post in the John Williams article is why the Fed can never slow or stop QE…the Fed has created massive Treasury supply for which there will never be organic demand absent a mega departure from risk into bond “safety” (ie, equities crash, depression)…

The fact that “foreign” holdings of US Treasury bonds are a record $5.65 T of the $12 T public outstanding debt (vs. $2 T Fed holdings) and foreigners are not selling off their holdings tells you they have been reassured QE is forever…otherwise they would soon be facing large losses as yields rose and bond prices collapsed…in other words, on a QE taper of it’s buying, foreigners would front run the exit.

Gold, silver, commodity prices falling in this situation are ludicrous…as ludicrous as if I told you there would be fewer and fewer dollars chasing growing # of assets and this would cause the price to rise…we have an inverse where ever more infinite dollars are chasing fixed and growing scarcer resources causing the price to…fall.

That this would be accepted and peddled by economists, professors, etc. to the people show it’s clearly time for me to check into the Loony bin. How deep into the propaganda state are we to observe something and accept it is exactly the opposite as our observation.

Given the core structure of the banknote scheme, whereas it infinitely co-generates currency inflation and indebtedness, each by the other in an exponential ‘Positive Feedback Loop’, I can not agree with you more.

No politicians or bankers have any control over the thing, now that their absolute influence over short term interest rates have proven completely futile in ameliorating the scheme’s expansion rate. The blatant falsification of market … numbers … is an undeniable signal of forlorn desperation that can no more avert collapse than chanting ‘up’ after stumbling over the edge of a precipice.

Haven’t posted much recently and for at least a week, but thought this article very interesting. I had a ‘discussion’ a while back here with someone who couldn’t see anything past what FOFOA writes as law. That it was gold and only gold that mattered. Well this piece makes a lot of sense to me.
Feel free to add your thoughts.
JC

Bimetallism: The Only Enduring Standard“This is the end of Western civilisation.” — Lewis Douglas (US Budget Director), remark to James P. Warburg after President Roosevelt announced that the US was going off the gold standard, April 18, 1933

Douglas was wrong, of course. The end of Western civilisation had already come sixty years earlier, when the United States demonetised silver.
Recently, I have been forced to recognize a huge gap in my understanding. I know that I am not alone, since over and over I read phrases like, “Gold is the money that has withstood the test of time” and “Gold has always been the only money,” and “Gold is the only money with intrinsic value.”
This, of course, is all wrong. 100% wrong. The gold standard by itself is a problem, because it is essentially monistic. A gold standard alone is just a fiat standard in disguise. A gold standard is just fiat money defined in terms of gold and gold defined in terms of fiat, without any independent valuation to keep the system honest.
Bimetallism, then, is the only answer, with gold defined in terms of silver and silver in terms of gold. This offers a self-correcting mechanism to keep the currencies honest.
That the bimetallic system is self-correcting can be induced from the 45 centuries men used it. Since what date have we had the greatest monetary and financial instability? Since the introduction of the monometallic gold standard in the 19th century (not to mention the introduction of Central Banks in the 1650s).
I am embarrassed to admit it, but this never quite lodged in my mind until I read an article, “Gold Standard = Fiat in Disguise” by one J.N. Tlaga that appeared onLeMetropoleCafe.com. Why I never saw the real issue in bimetallism, namely, it keeps the whole system honest and makes fiat impossible, I can’t explain, but it is considerably embarrassing. If nothing else, I should have seen it from a philosophical/theological standpoint, because a gold standard system is monist, and the universal matrix of truth is Trinitarian, not monism. Anyway, I didn’t see it, but do now.
The gold/silver system governed itself for nearly thirty centuries, without any governments fixing ratios. The first reference I remember to fixing ratios was the Spanish mint upping the ratio about 1496, so that argues they had been regulating it since the Middle Ages. The Romans also issued coins at fixed ratios, but deferring to the existing market, not trying to maintain some arbitrary ratio in the face of it. Meanwhile, the ancient East operated on a far different ratio, and the world was not destroyed or disrupted.
Today the market’s operation on the bimetallic ratio ought to be far more efficient than ever before, in view of technological advances in communications.
Once again, we see that the issue of money is far too delicate and crucial to mankind’s health to be left to government. Frankly, I believe the American Founding Fathers thought exactly that way, reading from the monetary system they set up.
That system was actually trimetallic, with copper, silver, and gold. The ratio was 840.21 ounces of copper equal 15 ounces of silver equals one ounce of gold, and that’s what the coins gave. They intentionally set up a system with a lower gold/silver ratio than the prevailing world rate (15:1 when the French mint rate was 15.5:1) in order to draw silver, the metal of daily commerce, into the country. They were right, since the colonies had suffered from a dearth of specie for two centuries.
The system they set up was one that Ed Vieira calls “symmetallism,” although I’m not sure that is the precise term, since others use that differently. Anyway, he means a system where one metal is the standard coin (in our case, the dollar of silver) and the coins of the other metal (“Eagles”, not even denominated in “dollars” per the 1792 Coinage Act, but “valued in” dollars) are periodically adjusted to answer changes in the market ratio. That exactly was done in 1834, without cheating anyone.
And through all this, everyone was free to contract for payment in silver, or gold, or anything else, without compunction. And they couldn’t be forced to take inflated bank notes. And there was no central bank.
But didn’t the fluctuations in value of gold versus silver wreak havoc with world commerce? From 1833 through 1873—four decades—the London price of silver valued in gold ranged from $1.297 an ounce (1833, against an official US price of $1.2929 an ounce) to $1.36 an ounce (1859). That’s a gigantic, colossal deviation of—4.86 percent! Today a 4.86% fluctuation in fiat money exchange rates in one day would put everybody to sleep, let alone four decades that quiet.
The cure for our monetary woes is not a gold standard, but a return to a sound, self-correcting bimetallic gold and silver standard.

Jccjktj … “Bimetallism, then, is the only answer, with gold defined in terms of silver and silver in terms of gold. This offers a self-correcting mechanism to keep the currencies honest.”

In sentiment and construction, I agree … but not completely.

Bi-metallism is only slightly less vulnerable to value manipulation than a mono-metallic scheme (yes, a fiat fraud in costume). I’d encourage you to take your newly won realization a further step, toward contemplating the poly-metallic scheme. Knowing that silver and gold shepherd each other toward properly rational value, is significantly enhanced by addition of a third influence, traditionally effected by copper.

Since the overwhelming majority of exchanges take place on the ‘bread and butter’ level, that vast volume, if conducted with copper, acts as the most solid base from which to affect silver … THEN gold. This arrangement has the HUGE social ramification of keeping the more humble among us in an independent financial scenario which protects them from coercion and plunder by the merchant sector in symbiotic collusion with manufacturers.

Indeed, it would benefit humankind enormously to ‘monetize’ platinum, palladium and rhodium to further divide up the ‘wealthy’ sector more competitively! What the poly-metallic scheme ‘brings to the table’ is a very tangible ‘division of wealth’ across social strata, which increasingly secures economic independence for each … and, the highest degree of ‘mobility’ to achieve one’s aspirations or facilitate recovery from failure. That in turn, engenders a more broadly content People!

@PatFields
I wholeheartedly agree with your widening of this area. It’s not a newly won realisation, I just thought it was an interesting piece in the scheme of things. FOFOA and his followers are blinkered to the importance of silver.
I have been stacking copper too for some time. From pre-decimal UK coins – Pennies, Farthings etc to circulation coins 1p and 2p (pre 1992 – 97% copper). Not the steel we now have.
I have a fair stash of cupronickel coins too. With 75% copper and 25% nickel, I think these will eventually be seen as silver is seen now.
You are right that there will need to be a broader distribution of wealth in a new hard asset paradigm and bringing the other metals into the mix would add to that.
JC

I found it a little peculiar that the event was hosted in part by the CPM Group, founded by Jeffery Christian. Jeff is on the list of individuals that have, in my opinion, risen to a level of “piece of shit” that few humans ever attain.

@funthea – agreed.
However, I always enjoy hearing Jeff Christian’s name as I know he will put his foot in his mouth on metals. 🙂
He can’t help himself. His latest attempt at a character assassination of Andrew Maguire was hilarious.
As soon as he did that, you knew that what Maguire is saying strikes right at the heart of the beast.
TPTB must cringe when he get’s coverage. The Cartel don’t put the spotlight on areas that they want in the dark like Christian has here.
As such they try to silence the likes of Maguire (failed) if not just ignore and hope everyone else ignores him.
JC

Thought his interview from december was worth reading. Also, he is still listed on the hall of shame despite being 100% accurate.

Our expectation now is that the gold price will be relatively weak for the next two or three quarters, into Q2/14 or Q3/14. We think that this period of bearishness about gold still has a ways to go. We’re not convinced that we’ll see prices fall further on an intra-day basis, and that the $1,180/oz low that we saw in late June may well prove to be the low. It was tested earlier this month and we bounced off of it, at least for now. Arguably, that may well hold, but there is a tremendous amount of bearishness about gold, and there is a tremendous amount of bullishness about the global economy and the U.S. economy.
In that environment, gold could be relatively weak. Investors right now are turned off to gold and are refocused on stocks and bonds. We think that by H2/14 investors may start refocusing on the structural financial and economic problems facing the U.S., Europe, Japan, China and the world as a whole. That could lead to a downdraft in U.S. stock prices. Combined with nasty, uncooperative Washington politicians, and a nasty, uncooperative election, H2/14 could lead investors to start buying gold again in higher quantities.TGR: The silver market is smaller and often more volatile than gold. Do you see the same fundamentals at work there? What are you expecting for 2014?JC: Silver is pretty much in the same situation. We’re a little less optimistic about silver. Broadly speaking, we expect it to be the same, but because silver is a schizophrenic metal that acts as an investment product and an industrial commodity and both are negative at the moment. The silver price could bounce around $18–22/oz for the next three quarters. Then it could be a little weaker than gold in 2015. Depending on what happens in the global economy and whether investors remain keen to add to their silver holdings at these prices, silver could do well after 2015.

Excerpt: “Even if the gold price is really good … it still needs to have a good proportion … We cannot deploy assets by following the price; we have to deploy assets by our own ability, following the change of the market. … Therefore the topic of gold is not that simple. Gold is closely related to the whole financial market and the macro economy.”

If I ‘translate’ Tan Ya Ling’s phraseology as intended; gold’s ‘price‘ in banknotes is understood as a chimera to be dismissed in deference to value implications derived from rational inter-relationship (‘proportion‘) of ‘assets‘ as found under supply-demand conditions, arising from ‘change of the market‘, to be optimized by China’s ‘own ability‘ for assessing overall rationality formulating the ‘whole financial market and the macro economy‘.

Of course, I may be reading my own predilection into the cite, but if I’m maintaining enough desire for impartiality, it does appear that Tan Ya Ling’s advise is proffered to encourage objectively valued asset-centric ‘currency’, if not ultimate return to hard money on the logic of ‘proportion‘. As I often highlight, China has hard-won success in emerging from this very paper-based quagmire in 1450 AD. At that time the predicament was truly existential for the country as we miraculously still know it to this day. The advantage it’s wisely prepared, is in having amassed a huge store of gold to secure itself against the impending repetition of paper currency collapse, whereas in the first event, it had to eke through with copper, only then slowly accumulating silver through to gold.

In the summarizing statement that, “China did not rely on numbers, but on concepts to catch the world’s attention“, I’m again tempted to the 1450 event, where China’s ‘concept‘ of tael-weight definition underlying money’s tender in ‘proportion‘ to other goods-at-market, which apparently enough inspired enduring confidence, was sufficient to re-establish not only China’s internal integrity against break-up, but economic predominance in Asia again, after what had to have been very severe financial embarrassment.

Sadly, if this is the (honestly inevitable) path China is resuming, the tables will be turned and the West will find itself, now some four and a half centuries hence, restructuring itself from a foundational base on copper, valued by relative weight against finished goods … initially supplied principally from Asia.

Should that be the prospective case, the best accommodation that Western countries can hope to pursue is to aggressively accumulate silver and copper stores … in ‘proportion‘ … to China’s gold.

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